Learn about countries' funding sources and their budget

The countries ’budget is financed through the collection of taxes, workers’ contributions, government investments, and loans, along with other, less important revenues such as administrative fees and public companies.

These revenues are used to finance sectors such as health, the judiciary, and education, or to develop administrative services, infrastructure, and security services.

Direct taxes

A report published by the Spanish site, Elorden mundial, says that taxes and workers ’contributions are the most important sources for securing state incomes, in addition to direct taxes on the income of citizens and companies based on their level of wealth. The goal is not only to accumulate money, but also to ensure the distribution of wealth. The country is full of people.

The most important examples of this type are the income tax, which is applied to personal assets, and the corporate tax that is applied to the profits earned by each company. As for labor contributions, they change according to salary, and workers and employers contribute to them, and are used to finance retirement salaries.

Indirect taxes

As for indirect taxes, they are not uneven according to income, and are applied equally to all citizens when they consume a good or service.

The most well-known type in this context is the value-added tax, which is extracted upon payment by adding a percentage to the price, but if the purchases are basic goods such as bread, then that tax is much lower than is the case with luxuries such as perfumes.

Countries can also impose a special indirect tax, in order to increase their incomes or push people to reduce consumption, such as the tax imposed on alcohol, tobacco and fuels, and there is another indirect tax, which is the customs tariffs imposed on goods that are bought and sold between countries.

Indirect taxes are applied equally to all citizens when they consume a good or service (Getty Images)

Other taxes

There is also another way to collect money, which is the taxes that various government agencies employ on citizens when using public spaces such as roads and side lanes, and this happens, for example, when the municipality imposes fees for parking cars, and the person who wants to park his car in a certain place pays an amount in exchange for This service, which was created by relying on public money, and administrations also impose fees for issuing personal documents, entering museums, and studying in universities.

There is also an exploitation tax that is regulated according to the same principle, whereby the state obtains it by imposing fees on companies that exploit public lands such as fields and forests, or granting them a license to carry out a specific activity that causes, for example, the emission of polluting gases.

The public sector also gets income from selling the public domain, such as land and farms, and on the other hand, the state can own companies of a governmental nature to increase its revenues by providing services for a fee, as happens, for example, with the public transport sector.

Loans

Loans are the simplest source of income for countries that lend money to individuals and public, private and foreign institutions, and get interest rates in return, and they, in turn, can borrow from these companies when they suffer from a deficit in the budget.

In general, economists say that the state’s budget is greatly affected by the size of the public debt, that is, the sum of the payments owed by the state to creditors, and the accumulation of these debts means that the wealth produced by a country will not go to the benefit of its citizens, but rather to pay off these debts, and that is why the borrowing policy leads in the long term. To impoverishment and dependence towards the creditor countries.

Money transfers

Finally, the public sector can obtain financial transfers from international institutions that focus on economic and social development, as well as other non-profit international agencies that do not wait for a fee for these funds.

An example is the funds created by the European Union for the benefit of member states, in order to boost economic growth and develop the agricultural sector or to promote social integration.